Parsing the GOP’s Health Insurance Statistics

There has been a lot of noise lately about the GOP health care plan (AHCA) and the differences to the current plan (ACA or Obamacare). A lot of statistics are being misinterpreted.

The New York Times has an excellent analysis of some of this. But to pick it apart, I want to highlight a few things:

Many Republicans are touting the CBO’s estimate that, some years out, premiums will be 10% lower under their plan than under the ACA. However, this carries with it a lot of misleading information.

First of all, many are spinning this as if costs would go down. That’s not the case. The premiums would still rise — they would just have risen less by the end of the period than under ACA. That also ignores the immediate spike and throwing millions out of the insurance marketplace altogether.

Now then, where does this 10% number come from? First of all, you have to understand the older people are substantially more expensive to the health system, and therefore more expensive to insure. ACA limited the price differential from the youngest to the oldest people, which meant that in effect some young people were subsidizing older ones on the individual market. The GOP plan removes that limit. Combined with other changes in subsidies and tax credits, this dramatically increases the cost to older people. For instance, the New York Times article cites a CBO estimate that “the price an average 64-year-old earning $26,500 would need to pay after using a subsidy would increase from $1,700 under Obamacare to $14,600 under the Republican plan.”

They further conclude that these exceptionally high rates would be so unaffordable to older people that the older people will simply stop buying insurance on the individual market. This means that the overall risk pool of people in that market is healthier, and therefore the average price is lower.

So, to sum up: the reason that insurance premiums under the GOP plan will rise at a slightly slower rate long-term is that the higher-risk people will be unable to afford insurance in the first place, leaving only the cheaper people to buy in.